At their most basic level, companies—particularly public companies—exist to maximize returns to shareholders. They are about making money, not making friends.

Still, the best businesses understand that they should treat partners well or they won’t have many left. That’s even more true in the relationship-based jewelry business.    

Which brings us to Pandora. So far this year it’s dropped more than 200 of its so-called unbranded (non-concept store) retailers, mainly independent jewelers who helped build the brand. Some were already feeling left out of two key company initiatives: its Disney charm line (reserved for concept stores) and its new eStore. 

Losing Pandora could be a tough blow for jewelers that have relied on it during tough times. The cuts have been targeted to lower-purchase-level retailers (the “white” dealers and “silver” dealers), and we have heard of jewelers being asked to upgrade to higher purchase levels or shop-in-shops. Which presents jewelers with a tough choice: Should they sink more money into the brand?  

Making the choice more complicated: The company has sent out mixed signals about where non-branded jewelers stand. Take what its executive vice president and chief financial officer told analysts on its recent conference call:

We will continue to close the unbranded stores, white and silver dealers…. Across all markets and in the U.S., expect us to continue to close unbranded doors and keep opening concept stores. That is really our focus. [Comment starts at 31:27.]

The company has undertaken a similar strategy with its distributors. It recently took over distribution in Singapore, Macau, and the Philippines. Quoting the CEO, from the same call:

[That] is in line with what we have been doing over the years. When we see our distributors doing well, and we are getting to a position that we are well-established in the market, and it comes up for renewal of the agreement, we have a look at it, and if we find that it is beneficial for us to take over, we do that. [Comment starts at 48:20.]

Basically, the distributors do the spadework. Pandora reaps the rewards. 

Pandora is not the first company to do this, nor will it likely be the last. If jewelers or distributors are losing lots of money on the line, they might drop it as well. Pandora clearly wants increased control of its distribution. As long as all parties are clear about their intentions upfront, that’s fine.

The problem is, Pandora executives have said in the past they would not act this way. Take this 2011 interview with Pandora’s president for North America John White:

If the company ever ventures into e-commerce in the U.S., White stressed, it will be [a] model where it keeps the retailer in the equation. “We have made it clear that we are a wholesale company,” he said.

This year, it opened an eStore. Retailers were not part of the equation. 

The next year, CEO Björn Gulden told me that, despite its growing fleet of concept stores, the company was committed to independent retailers. “We have a solid balance in the U.S.,” he said. Now, it seems, the balance is being tilted more toward one side.

To be fair, neither of those men still work for the company. Still, the quotes date back from 2011 and 2012, which is not that long ago. 

From a business standpoint, this behavior could backfire. Look at De Beers. Last year, CEO Philippe Mellier took a similarly hardnosed approach toward his clients, saying their lack of profitability was not his problem. It took a while for sightholders to act, but eventually they did, and in July they rejected nearly 70 percent of the goods on offer. That has never happened before. Not only does this give De Beers a shot where it feels it—its balance sheet—but it devalues sightholder status, formerly one of its chief assets. It now signifies something burdensome rather than something prestigious.

Pandora is an admirable company. In a few decades, it’s built one of the most powerful brands in the industry’s history. Its sales sustained jewelers during the darkest days of the recession. It has turned around its 2011 tailspin. Its new ads are great. Financially, it’s on a roll. It rules on Google! 

But all business is cyclical, especially the jewelry business. Pandora was enjoying a similar wave in 2010, until overambitious merchandising caused sales to take an abrupt nosedive. The villain then was hubris, and that could hurt it again.

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